OPERATIONS MGT Assign

PART A

Question 1

Discuss the changing philosophy of operations management. What are the new trends in operations management?Answer.Operations management is an area of management concerned with overseeing, designing, and controlling the process of production and redesigning business operations in the production of goods or services. It involves the responsibility of ensuring that business operations are efficient in terms of using as few resources as needed, and effective in terms of meeting customer requirements. It is concerned with managing the process that converts inputs (in the forms of raw materials, labour, and energy) into outputs (in the form of goods and/or services).

Operations Management

Although productivity benefited considerably from technological inventions and division of labour in the era of industrial revolution, the problem of systematic measurement of performances and the calculation of these by the use of formulas remained somewhat unexplored until Frederick Winslow Taylor. Frederick Taylor early work focused on developing what he called a "differential piece-rate system" and a series of experiments, measurements and formulas dealing with cutting metals and manual labour.] The differential piece-rate system consisted in offering two different pay rates for doing a job: a higher rate for workers with high productivity (efficiency) and who produced high quality goods (effectiveness) and a lower rate for those who fail to achieve the standard. One of the problems Taylor believed could be solved with this system was the problem of soldiering: faster workers reducing their production rate to that of the slowest worker. In 1911 Taylor published his "The Principles of Scientific Management", in which he characterized scientific management as:

The development of a true science; The scientific selection of the worker; The scientific education and development of the worker; Intimate friendly cooperation between the management and the workers.

Taylor is also credited for developing stopwatch time study, this combined with Frank and Lillian Gilbreth motion study gave way to time and motion study which is centred on the concepts of standard method and standard time. Frank Gilbreth is also responsible for introducing the flow process chart. Other contemporaries of Taylor are Morris Cooke (rural electrification in the 1920s and implementer of Taylor's principles of scientific management in the Philadelphia's Department of Public Works), Carl Barth(speed-and-feed-calculating slide rules ) and Henry Gantt (Gantt chart). Also in 1910 Hugo

Diemer published the first industrial engineering book: Factory Organization and Administration.

In 1913 Ford W. Harris published his "How Many parts to make at once" in which he presented the idea of the economic order quantity model. He described the problem as follows:

"Interest on capital tied up in wages, material and overhead sets a maximum limit to the quantity of parts which can be profitably manufactured at one time; "set-up" costs on the job fix the minimum. Experience has shown one manager a way to determine the economical size of lots"

This paper inspired a large body of mathematical literature focusing on the problem of production planning and inventory control.

In 1924 Walter Shewhart introduced the control chart through a technical memorandum while working at Bell Labs, central to his method was the distinction between common cause and special cause of variation. In 1931 Shewhart published his Economic Control of Quality of Manufactured Product, the first systematic treatment  of the subject of Statistical Process Control (SPC).

In the 1940s methods-time measurement (MTM) was developed by H.B. Maynard, JL Schwab and GJ Stegemerten. MTM was the first of a series of predetermined motion time systems, predetermined in the sense that estimates of time are not determined in loco but are derived from an industry standard. This was explained by its originators in a book they published in 1948 called "Method-Time Measurement".

Up to this point in history, optimization techniques were known for a very long time, from the simple methods employed by F.W.Harris to the more elaborate techniques of the calculus of variations developed by Euler in 1733 or the multipliers employed by Lagrange in 1811, and computers were slowly being developed, first as analog computers by Sir William Thomson (1872) and James Thomson (1876) moving to the eletromechanical computers of Konrad Zuse (1939 and 1941). During World War II however, the development of mathematical optimization went through a major boost with the development of the Colossus computer, the first electronic digital computer that was all programmable, and the possibility to computationally solve large linear programming problems, first by Kantorovich in 1939 working for the Soviet government and later on in 1947 with the simplex method of Dantzig. These methods are known today as belonging to the field of operations research.

From this point on a curious development took place: while in the United States the possibility of applying the computer to business operations led to the development of management software architecture such as MRP and successive modifications, and ever more sophisticated optimization techniques and manufacturing simulation software, in post-war Japan a series of events at Toyota Motor led to the development of the Toyota Production System (TPS) and Lean Manufacturing.

Recent trends in operations management revolve around concepts such as:

Business Process Re-engineering (launched by Michael Hammer in 1993): a business management strategy focusing on the analysis and design of workflows and business processes within an organization. BPR seeks to help companies radically restructure their organizations by focusing on the ground-up design of their business processes.

Lean Manufacturing/Just-In-Time: a systemic method for the elimination of waste within a manufacturing process. Lean also takes into account waste created through overburden and waste created through unevenness in workloads.  

Six Sigma (an approach to quality developed at Motorola between 1985-1987): Six Sigma refers to control limits placed at six (6) standard deviations from the mean of a normal distribution, this became very famous after Jack Welch of General Electric launched a company-wide initiative in 1995 to adopt this set of methods. More recently, Six Sigma has included DMAIC (for improving processes) and DFSS (for designing new products and new processes)

Reconfigurable Manufacturing Systems: a production system designed at the outset for rapid change in its structure, as well as its hardware and software components, in order to quickly adjust its production capacity and functionality within a part family in response to sudden market changes or intrinsic system change.

Process production means that the product undergoes physical-chemical transformations and lacks assembly operations, therefore the original raw materials can't easily be obtained from the final product, examples include: paper, cement, nylon and petroleum products.

Part production (cars and ovens) comprises both fabrication systems and assembly systems. In the first category we find job shops, manufacturing cells, flexible manufacturing systems and transfer lines, in the assembly category we have fixed position systems, assembly lines and assembly shops (both manual and/or automated operations). http://en.wikipedia.org/wiki/Operations_management

PARTY A

Question 2

What is the difference in strategy in developing an initial layout for a new facility as compared to the strategy in improving the layout of an existing facility?Answer.

Facility layout and design is an important component of a business's overall operations, both

in terms of maximizing the effectiveness of the production process and meeting the needs of

employees. The basic objective of layout is to ensure a smooth flow of work, material, and

information through a system. The basic meaning of facility is the space in which a business's

activities take place. The layout and design of that space impact greatly how the work is

done, the flow of work, materials, and information through the system. The key to good

facility layout and design is the integration of the needs of people (personnel and customers),

materials (raw, finishes, and in process), and machinery in such a way that they create a

single, well-functioning and cost efficient system.

Facility layout involves:-

Planning and arranging facilities in new plant. Improvement in existing layout to introduce new methods.

The following are factors that should be taken into consideration when developing an initial layout;

Managerial policies- Top management decides the layout objectives. Industry-Type of industry Ease of future expansion or change—Facilities should be designed so that they can

be easily expanded or adjusted to meet changing production needs. "Although redesigning a facility is a major, expensive undertaking not to be done lightly, there is always the possibility that a redesign will be necessary," said Weiss and Gershon in their book Production and Operations Management.

Flow of movement—The facility design should reflect a recognition of the

importance of smooth process flow. In the case of factory facilities, the plan will

show the raw materials entering your plant at one end and the finished product

emerging at the other. The flow need not be a straight line. Parallel flows, U-shaped

patterns, or even a zig-zag that ends up with the finished product back at the

shipping and receiving bays can be functional. However, backtracking is to be

avoided in whatever pattern is chosen. When parts and materials move against or

across the overall flow, personnel and paperwork become confused, parts become

lost, and the attainment of coordination becomes complicated.

Materials handling—Business owners should make certain that the facility layout

makes it possible to handle materials (products, equipment, containers, etc.) in an

orderly, efficient and preferably simple manner. Capacity-Analyse the maximum capacity of the production process, and avoid

bottlenecks 

Output needs—The facility should be laid out in a way that is conducive to helping

the business meet its production needs.

Space utilization—This aspect of facility design includes everything from making

sure that traffic lanes are wide enough to making certain that inventory storage

warehouses or rooms utilize as much vertical space as possible.

Shipping and receiving—Leave ample room for this aspect of operations.

Receiving and shipping should get enough space for the work to be done effectively.

Ease of communication and support—Facilities should be laid out so that

communication within various areas of the business and interactions with vendors

and customers can be done in an easy and effective manner. Similarly, support areas

should be stationed in areas that help them to serve operating areas.

Impact on employee morale and job satisfaction— Since countless studies have

indicated that employee morale has a major impact on productivity, this should be

considered at design stage. Some ways layout design can increase morale are by

providing for light-coloured walls, windows, space and including a cafeteria or even

a gymnasium in the facility design.

Safety—The facility layout should enable the business to effectively operate in

accordance with Occupational Safety and Health Administration guidelines and

other legal restrictions.

Promotional value— If the business commonly receives visitors in the form of

customers, vendors, investors, etc., business owners may want to make sure that the

facility layout is an attractive one that further burnishes the company's reputation.

Design factors that can influence the degree of attractiveness of a facility include not

only the design of the production area itself, but the impact that it has on, for

instance, ease of fulfilling maintenance or cleaning tasks.

Implement- simulate and model the possible solutions with a computer based program before implementing

Redesigning Existing Facility

Measuring effectiveness in an existing facilities layout is a prerequisite in order to initiate any

action that will improve layout effectiveness. Available methods on measurement of layout

effectiveness help measure it in respect to only material handling cost and select an effective

layout from a set of available alternatives. Nevertheless, factors such as empty travel of

material handling equipment, layout flexibility and area utilisation contribute significantly

towards the layout effectiveness. Thus, it is necessary to have a measurement model to

determine the facilities layout’s effectiveness by considering all significant factors. Hence, a

measurement model considering a set of three layout effectiveness factors namely Facilities

Layout Flexibility (FLF), Productive Area Utilisation (PAU) and Closeness Gap (CG) can be

used.

Facilities Layout Flexibility

The design of an existing facility should be flexible enough to accommodate expansion and

meet changing production needs.

Productive Area Utilisation

Capacity utilisation is a measure of the extent to which the productive capacity of a business

is being used. It is important to remember that increasing capacity often results in higher

fixed costs.  A business should aim to make the most productive use it can of its existing

capacity.

Closeness Gap (CP)

The CG is developed in respect to the objective of bringing closer the highly interactive facilities or departments. The CG analysis can incorporate numerous aspects of layout that include: empty travel of material handling equipment, information flow, personnel flow and equipment flow

PARTY A

Question 3

Discuss the various factors to be considered to decide the location of a cement plant? How do the factors differ in case of a nuclear plant?Answer.

Plant location

Plant location is a very important issue as it has a direct impact on the operational cost of the plant. Industrial plants including cement plants use raw materials for producing the product. It also uses various spares and consumables for the maintenance of plant and machinery. Plants also need skilled manpower for its operations. Availability of these resources and their cost differs from one location to another and has a direct effect on the operational cost of the plant.

Factors Affecting Cement Plant Location

The optimum location of an industry depends upon demand in relation to supply (marketfor its product), availability of raw material, production cost, distribution cost (transport costin particular), prospects for profit, managements regional interest, and government policy concerning regional development.DemandDemand plays a major role in the choice of plant location of any facility and cement plant is not exceptional. If there is a high constructional activity in a particular region then it is obvious that the demand for cement will be high in that region. All other important factors being favourable that would be an ideal region for plant location.

Raw Materials

In the cement industry, availability of raw material, fuel and transport cost are more significant than the other factors because cement is a weight losing and bulky product. Its weight losing nature argues for location near raw materials while bulkiness favours location near the market. Since Weber's (1929) material index (ratio of localized material to output) is more than 1.5 for cement, the net effect of these two factors favours nearness of raw materials. As a result cement factories are, in fact, located in close proximity to the sources of raw materials. Most cement manufacturing units are established within a radius of 15 to 20 kilometres of limestone deposits. The raw materials required for cement are limestone, clay, and gypsum. Proximity of railhead is essential for reducing the transportation cost. In plants where cement is manufactured through the wet process large quantities of water are needed. In countries where water is a problem this might affect location. The other important factors may be the availability of coal since diesel, the alternative source of fuel, is considerably more expensive especially in developing countries like Zambia. In Zambia Chilanga Cement now Larfarge is located in Chilanga which is rich in limestone deposits and not far from

Mamba Coal Mine. Portland Cement Zambia is located in Ndola because of the limestone deposits in Ndola too. Both plants locations are near the railway line for easy transportation.

Production Cost and Profit Prospects

Cost for any industry is usually classified into fixed cost and Variable cost. Fixed costincludes cost of land, buildings, machines, etc., and variable cost comprises costs of rawmaterials, fuel, labour, transport, etc. Buildings and machines costs are about the same in different regions. Land cost varies over regions but exerts no significant influence on locational decisions, for it is a small part of the total cost. Variable cost is significant because it is influenced by the availability of raw materials and labour, transport cost, etc. A critical analysis of these costs may review that in certain regions the production cost is cheaper or more expensive than the other. Management may make decisions based on that kind of information.

Managements Interest

The choice of location of a new factory to a certain extent depends on the management'sinterest in a particular region. If the management has country-wide industrial interest,perhaps this factor would not merit attention in location studies. However, if the managementhas regional or local industrial interest this factor becomes a decisive one. Some companies would prefer to dominate a region while some would want to have presence in several regions.

Government Policy

For quarrying of limestone, the cement industry has necessarily to depend on the governmentfor lease terms. Besides, encouragement and facilities or discouragement and hindrancefrom government do exert their influence on location. Government may encourage the expansion of the cement industry in its preferred territories. Governments normally want to spread development to provinces that are less developed. They may also introduce subsides or tax rebates to attract investments in certain regions.

Unlike for cement the nuclear plant location would be largely influenced by the following factors which are more inclined on safety related issues:-

Characteristics of reactor design and proposed operation including:

Seismic and geologic sitting criteria for nuclear plants, describes the nature of investigations required to obtain the geologic and seismic data necessary to determine site suitability and to provide reasonable assurance that a new power plant can be constructed and operated at a proposed site without undue risk to the health and safety of the public. It describes the procedures for determining the quantitative vibratory ground motion design basis at a site due to earthquakes and describes information needed to determine whether and to what extent a nuclear power plant need be designed to withstand the effects of surface faulting.

Intended use of the reactor, proposed maximum power level and the nature and inventory of contained radioactive material.

The safety features that are to be engineered into the facility and those barriers that are to be breached as a result of an accident before a release of radioactive material to the environment can occur.

Area surrounding the reactor, in which the reactor licence has the authority to determine all activities including exclusion or removal of personnel and property from the area.

Area immediately surrounding the exclusion which contains residents, the total number and density of which are such that there is reasonable probability that appropriate safety measures could be taken in their behalf in the event of a serious accident occurs.

Distance from the reactor to the nearest boundary of a densely populated centre (greater or equal 25,000 residents).

PARTY A

Question 4

Write short notes on: (a) Capacity requirement plans (b) Rough cut capacity plans (c) Resource requirement plansAnswer.

Capacity requirement plans

Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products.  In the context of capacity planning, design capacity is the maximum amount of work that an organization is capable of completing in a given period. Effective capacity is the maximum amount of work that an organization is capable of completing in a given period due to constraints such as quality problems, delays, and materials handling.

A discrepancy between the capacity of an organization and the demands of its customers results in inefficiency, either in under-utilized resources or unfulfilled customers. The goal of capacity planning is to minimize this discrepancy. Demand for an organization's capacity varies based on changes in production output, such as increasing or decreasing the production quantity of an existing product, or producing new products. Better utilization of existing capacity can be accomplished through improvements in overall equipment effectiveness (OEE). Capacity can be increased through introducing new techniques, equipment and materials, increasing the number of workers or machines, increasing the number of shifts, or acquiring additional production facilities.

Capacity is calculated as (number of machines or workers) × (number of shifts) × (utilization) × (efficiency).

Rough cut capacity plan

A master production schedule (MPS) is based on forecasts and firm orders. Before this can be released to production, it must be checked to see if the targets in the MPS can in fact be achieved. Rough-cut capacity planning is one of the methods used to check the feasibility of the proposed MPS. RCCP is used to make a quick check on the capacity of the key resources to meet the proposed MPS.

During the RCCP process, a bill of resources is attached to each item on the MPS. A bill of resources is a listing of resources required to produce one unit of the item (including labour and machines or equipment, and so on). The MPS is exploded on the key resources (labour hours, machine hours, storage costs, etc.). It is important to use accurate lead-times in this process.

If the RCCP output indicates that the proposed MPS is not feasible, then either additional resources are proposed (for example, overtime, new machinery, out-sourcing), or the MPS is revised.

Resource requirement plan

Resource requirement plan is the process of determining the types and the amount of resources that are required by an organization to implement its long-range plan. It is strategic in nature. It involves a joint production, marketing and finance efforts.Resource requirement planning involves the following:-

Business plans Long range demand forecast Capacity planning Facility planning Equipment and labour planning Evolution of alternative plans Decision and implementation

PARTY A

Question 5

Actual demand differs from forecasted demand. How to adjust the aggregate plan to meet this situation?Answer.

Aggregate plan

Aggregate planning is a technique for adjusting production to the ups and downs of demand. An aggregate plan gets its name from the fact that it must include demand forecasts, resources and capacity and express these as an aggregate, or combined, strategy. This type of planning covers a period of two to 12 months, sometimes as much as 18 months, depending on the company's ability to project demand. Setting objectives through aggregate planning help businesses run more efficiently.

Adjusting aggregate plan for demand to match capacity

Steps taken to produce an aggregate plan begin with the determination of demand and the

determination of current capacity. Capacity is expressed as total number of units per time

period that can be produced (this requires that an average number of units be computed since

the total may include a product mix utilizing distinctly different production times). Demand is

expressed as total number of units needed. If the two are not in balance (equal), the firm must

decide whether to increase or decrease capacity to meet demand or increase or decrease

demand to meet capacity. In order to accomplish this, a number of options are available.

Options for situations in which demand needs to be increased in order to match capacity

include:

Pricing. Varying pricing to increase demand in periods when demand is less than peak. For example, show prices for movie theatres, off-season rates for hotels, weekend rates for telephone service, and pricing for items that experience seasonal demand.

Promotion. Advertising, direct marketing, and other forms of promotion are used to shift demand.

Back ordering. By postponing delivery on current orders demand is shifted to period when capacity is not fully utilized. This is really just a form of smoothing demand. Service industries are able to smooth demand by taking reservations or by making appointments in an attempt to avoid walk-in customers. Some refer to this as "partitioning" demand.

New demand creation. A new, but complementary demand is created for a product

or service. When restaurant customers have to wait, they are frequently diverted into

a complementary (but not complimentary) service, the bar. Other examples include

the addition of video arcades within movie theatres, and the expansion of services at

convenience stores.

Options which can be used to increase or decrease capacity to match current demand include:

Hire or lay off. By hiring additional workers as needed or by laying off workers not currently required to meet demand, firms can maintain a balance between capacity and demand.

Overtime. By asking or requiring workers to work extra hours a day or an extra day per week, firms can create a temporary increase in capacity without the added expense of hiring additional workers.

Part-time or casual labour. By utilizing temporary workers or casual labour Inventory. Finished-goods inventory can be built up in periods of slack demand and

then used to fill demand during periods of high demand. In this way no new workers have to be hired, no temporary or casual labour is needed, and no overtime is incurred.

Subcontracting. Frequently firms choose to allow another manufacturer or service provider to provide the product or service to the subcontracting firm's customers. By subcontracting work to an alternative source, additional capacity is temporarily obtained.

Cross-training. Cross-trained employees may be able to perform tasks in several operations, creating some flexibility when scheduling capacity.

Other methods. While varying workforce size and utilization, inventory buildup/backlogging, and subcontracting are well-known alternatives, there are other,

more novel ways that find use in industry. Among these options are sharing employees with counter-cyclical companies and attempting to find interesting and meaningful projects for employees to do during slack times. http://www.referenceforbusiness.com/management/A-Bud/Aggregate-Planning.html#ixzz3c2QYVxsh

PARTY B

Question 6

Why is materials planning needed? Discuss the various aspects of materials planning. Which other departments contribute to materials planning and in what way?Answer.In any integrated Materials Management environment, planning for getting the materials is the starting point for the whole MM function. Materials planning set the procurement function and the subsequent material functions rolling. Material planning is a scientific way of determining the requirements starting with raw materials, consumables, spare  parts and all other materials that are required to meet the given production plan for a certain period. Materials planning is derived from the over all organisational plan and hence it is always a sub-plan of the broad organisational plan .What it does is forecasting and initiating for procurement of materials. Below are some of the reasons why materials planning is needed:-

Materials planning forces the planner to determine the total material required during the year, to examine its required specifications and fixing of acceptable limits of the materials that is at what limit a material is to be rejected and at what stage a material can be accepted.

Materials planning help in development of procedures and systems and also in improving the existing procedures and systems.

Focuses on control parameters which includes the levels for safety stock, minimum and maximum stock level, reorder level, EOQ and inventory turnover ratio. Classification of spare parts and consumables is an important part of planning. A typical classification for inventory items could be, protected items, stock items, project items, obsolete items etc. Classification of items helps in deciding the appropriate attention to different items according to the requirement and helps in avoiding stock outs as well as over stocking of spares.

Fixing of norms for shelf life is an important aspect of materials planning and helps in avoiding spoilage of materials with limited shelf life.

Materials planning help in arranging items of correct specifications, at the right time and in the right quantity.

It helps in adhering to production schedules, market commitments and improves the image of the organization.

Dealing with material planning, a company encounters a diverse range of aspects, some of which are very important. For example, lot sizes and set up time is very important dimension of material planning. The issue of outside members of the supply chain holds great importance too. Logistical issue are another significantly development whilst a company is doing material planning. More of these aspects are given below:

Price- Variations in price might affect materials planning Physical inventory—the quantity of a part that is actually in the warehouse today Shop-floor stock—the quantity of a part waiting to be processed in the workshop(s) Reserved stock—the quantity of a part that is reserved for a customer/manufacturing

order and thus not available for planning Open order quantity—the quantity of a part that has already been ordered from the

factory (production orders) or from suppliers (purchase orders) Reorder level—the quantity of a part that causes a new order to be issued when the

stock falls below this quantity (taking into account that the reordering takes time) Safety stock—the minimum quantity of a part the stock should not fall short of for

safety reasons EOQ- Economic Order Quantity Lead time for all inventories should be known

Departments contributing to materials planning

The main function of materials planning is to guarantee material availability, that is, it is used to procure or produce the requirement quantities on time both for internal purposes and for sales and distribution. This involves the monitoring of stock and creation of procurement proposals for purchasing and production.

Here is information flow within a company's Materials Planning process

Sales and distribution take sales orders from the market In demand management, sales are planned via a sales forecast. The result is the

independent requirement, that is, the requirement for the finished product, tradable assemblies, trading goods and replacements. This result triggers material requirements planning.

In order to cover these requirements, MRP calculates procurements quantities and dates as well as plans the corresponding procurement elements.

If the material is produced in-house, the system calculates the quantity of components required to produce the finished product or assembly, by exploding the bill of material.

The procurement elements are converted to production elements for in-house production and purchase orders for external procurement.

Production order contains its own scheduling procedures, capacity planning and status management.

Cost accounting is also carried out via the individual production order to ascertain costs

Purchasing procedure is triggered by materials that are procured externally. The quantities made available by production or by external procurement are placed in

stock and managed by Inventory Management.

PARTY B

Question 7

What do you understand by the term corrective maintenance? In what way is corrective maintenance different from preventive maintenance and predictive maintenance? Support your answer with examples.

Answer.

Corrective Maintenance

During preventive checks, certain problems are noticed about the condition of the machine. The machine might be operating in a condition that could cause damage to the machine if continued to operate. Therefore, the machine is to be stopped without delay to correct the situation. For example, if an abnormal sound is coming from a car, it is necessary to identify the part of the car from which the abnormal sound is coming. It is observed on detailed inspection, that its crank shaft is damaged or the bearing of the crank shaft is running dry . If it is established that the bearing is starved of the lubricant or running dry, the problem of abnormal sound is solved by lubrication of the bearing. The steps for correcting the situation are termed as corrective maintenance.

How corrective maintenance different from preventive maintenance and predictive maintenance

Preventive Maintenance (PM) is that activity performed in some routine or regularly scheduled fashion designed to keep equipment in an existing state, prevent deterioration or failure, and identify work of a corrective nature to keep equipment from causing non-productive time in any capacity. Predictive Maintenance (PdM) technology uses some proven testing method such as thermography, tribology, or ultrasonic to trend equipment performance and “predict” when certain preventive maintenance activity should be performed, thereby heading off a potential failure.

Corrective Maintenance (CM) is the act of performing some repair or adjustment for a condition that was identified during the accomplishment of a Preventive Maintenance or Predictive Maintenance evolution, and cannot reasonably be corrected within the allowed labour time for accomplishing the PM or PdM. For example, during the PM or PdM routine checks machine components that need maintenance attention are identified and listed down and at an appropriate time subjected to Corrective Maintenance.

PARTY B

Question 8

What do you understand by ‘Total quality Management’? Discuss the objectives of total quality management. In what way the approach to Total Quality Management has changed over the last ten years?

Answer.

A holistic approach to long-term success that views continuous improvement in all aspects of an organization as a process and not as a short-term goal. It aims to radically transform the organization through progressive changes in the attitudes, practices, structures, and systems. Total quality management transcends the product quality approach, involves everyone in the organization, and encompasses its every function: administration, communication, distribution, manufacturing, marketing, planning and training. It may be defined in several ways which include:-

Commitment and direct involvement of highest-level executives in setting quality goals and policies, allocation of resources and monitoring of results

Realisation that transforming an organisation means fundamental changes in basic beliefs and practices and that this transformation is every one’s job.

Building quality into products and practices right from the beginning Understanding of the changing needs of the internal and external customers and

stakeholders and satisfying them in cost effective manner Instituting leadership in place of mere supervision so that every individual performs in

the best possible manner to improve quality and productivity, thereby continually reducing total cost

Eliminating barriers between people and departments so that they work as to achieve common objectives

Instituting flexible programs for training and education and providing meaningful measures of performance that guide the self-improvement efforts of everyone involved

Objectives of Total Quality Management

The purpose of quality objectives is to determine conformity to (customer and regulatory) requirements, and facilitate the effective deployment and improvement of the quality

management system (QMS). There are two basic objectives of Total Quality Management namely:

customer satisfaction and performance superiority.

Customer satisfaction

Customer satisfaction is not an objective statistics but more of a feeling or attitude. It enhances customer loyalty, which is the feeling of attachment to or affection for a company’s people, product or services. If a customer is happy with a product or a service it has hired or purchase they will pay their bills promptly, which greatly improves cash flow-the lifeblood of any organization. Customers that are satisfied will increase in number, buy more, and buy more frequently. By delighting the customer you can turn satisfied customers into loyal customers. Loyalty generates repeated purchases and increased revenues, thus leading to organizational excellence. Employee satisfaction is needed to support continuous improvement and external customer satisfaction. Delighted employees who feel proud of their work have an outstanding performance, thus having a positive impact on business excellence.

Performance Superiority

The first, and overriding, feature of TQM is the company’s focus on its customers. Quality is defined as meeting or exceeding customer expectations. The goal is to first identify and then meet customer needs. TQM recognizes that a perfectly produced product has little value if it is not what the customer wants. The product should function as expected. Therefore, we can say that quality is customer driven. However, it is not always easy to determine what the customer wants, because tastes and preferences change. Also, customer expectations often vary from one customer to the next. For example, in the auto industry trends change relatively quickly, from small cars to sports utility vehicles and back to small cars. The same is true in the retail industry, where styles and fashion are short lived. Companies need to continually gather information by means of focus groups, market surveys, and customer interviews in order to stay in tune with what customers want. They must always remember that they would not be in business if it were not for their customers. A superior product will satisfy the performance characteristics such as speed, cost, quality, dependability and reliability

Other objectives of Total Quality Management

Making the organization market and customer focused Guiding the organization by its values, vision, mission, and goals set through

‘strategic planning process. Changing the organization from function focused to customer focused, where

customer priorities come first in all activities. Making the organization flexible and learning oriented to cope with change

Making the organization believe in and seek continuous improvement as a new way of life.

Creating an organization where people are at the core of every activity, and are encouraged and empowered to work in teams.

Promoting a transparent leadership process to lead the organization to excellence in its chosen field of business

Change In Total Quality Management Over The Last Ten Years

Historical Development of TQM

TQM gained prominence in western countries in the 1980s as a response to the competitive advantage gained by Japanese companies, particularly in the automobile and electronics industries. However, the roots of modern quality management can be traced back to the early 1920s, when statistical theory was first applied to product quality control. This concept was further developed in Japan in the 1940s and 1950s, and was led by “quality gurus” such as Deming, Juran and Feigenbaum. Inspection

During the early years of manufacturing, inspection was used to decide whether a worker’s job or a product met the requirements and was, therefore, acceptable. The theories of F. W. Taylor, published in “The Principles of Scientific Management” in 1911 led to the emergence of separate inspection departments in industry. From these inspection departments arose an important new idea, defect prevention, which in turn led to quality control. Inspection still has an important role in modern quality practices. However, it is no longer seen as the answer to all quality problems. Rather, it is one tool within a wider array. Quality Control and Statistical Theory

Quality Control was introduced to detect and fix problems along the production line, and aimed to prevent the manufacture of faulty products. Statistical theory played an important role in this area. In the 1920s, Dr W. Shewhart developed the application of statistical methods to the management of quality. He produced the first modern control chart and demonstrated that variation in the production process leads to variation in products. Therefore, eliminating variation in the process would lead to a consistently high standard of end product.

Quality in Japan

In the 1940s, Japanese products were perceived as cheap, shoddy imitations. Japanese industrial leaders recognised this problem and aimed to produce innovative, high quality products. They invited quality gurus, such as Deming, Juran, and Feigenbaum, to advise on how to achieve this aim. In the 1950s, quality control and management developed quickly and became a main theme of Japanese management. The idea of quality did not stop at the management level. Quality circles at employee level started in the early 1960s. A quality circle is a volunteer group of workers that meet to discuss issues aimed at improving aspects of their work. A by-product of quality circles was employee motivation and involvement.

Total Quality

The term “Total Quality” was used for the first time by Feigenbaum, in a paper published in 1956. Feigenbaum described a total quality system as “one which embraces the whole cycle of customer satisfaction from the interpretation of his requirements prior to the ordering stage, through to the supply of a product or service at an economical price and on to his perception of the product after he has used it over an appropriate period of time”. At this time, Japan’s exports to the USA and Europe were beginning to increase significantly, as a result of its comparatively cheaper prices and higher quality.

Total Quality ManagementIn the 1980s and 1990s, there began a new phase of quality control and management, which became known as Total Quality Management (TQM). Having observed Japan’s success at quality development, western companies started to introduce their own quality initiatives. TQM was developed as a catchall phrase for the broad spectrum of quality-focused strategies, programmes and techniques during this period, and became the centre of focus for the western quality movement. Initial TQM definitions were customer-focused. However, as time progressed and in particular following the development of business excellence models the definitions became broader and focused on all stakeholders. Quality Awards and Excellence Models

In 1987, the development of the Malcolm Baldrige Award in the United States provided a major step forward in quality management. The Baldrige Criteria for Performance Excellence, on which the award was based, represented the first clearly defined and globally recognised TQM model. (Other similar models were developed before or shortly after, such as the Australian and Canadian models, but they did not have the same international impact.) The Baldrige Criteria were developed by the United States government to encourage companies to improve their competitiveness

PARTY B

Case Study

Question

What factors should be analyzed in making this capacity decision?Answer.Since the main objective is to increase net earnings before taxes the focus should be on those elements that directly affect earnings such as:

Number of units to be rented/Month Monthly rentals Monthly Operational Costs Monthly Maintenance Costs Lowest Occupancy rate/Month

Expected Revenue From Each ApartmentDensmore Paradise West High Gate

Monthly Rentals 410 290 240No. of Units 70 120 400Occupancy Rate @ 100%= 28,700 100%= 32,800 100%= 96,000 @ 90%= 25,830 95%= 31,160 90%= 86,400

@ 85%= 24,395 90%= 29,520 80%= 76,800 @ 80%= 22,960 70%= 67,200

Compute Net Earnings For Each Alternative

Desmore & Paradise West High GateDensmoreLowest Monthly Rental 22,960 67,200Paradise WestLowest Monthly Rental 29,520Maintenance/Operations Cost (30,000) (150,000)Net Earnings Before Tax 22,480 (82,800)

The above analysis shows that in the worst scenario Densmore project would give a net earning of $22,480 while High Gate project would give a loss of $82,800. If Paradise Land is to maximise net earnings before tax, it should go for Densmore Complex Project.

PARTY C

Answer

1 B 7 B 13 C 19 C 25 B2 C 8 D 14 B 20 D 26 C3 D 9 E 15 C 21 D 27 D4 B 10 B 16 A 22 D 28 D5 D 11 C 17 C 23 D 29 C6 D 12 B 18 C 24 D 30 C